FTC Slaps Google's Wrist in Search, Patent Probe

Federal regulators concluded Thursday a 19-month probe into Google's search and patent-licensing practices, and in the end took no action against Google's search rankings that favor its own products over competitors.

Still, in an accord with the Federal Trade Commission, Google made some concessions. Among other things, the search giant loosened its restrictions on its AdWords advertising platform that prevented advertisers from appearing on competing platforms.

"They hadn't engaged in illegal monopolization and hadn't violated the FTC Act," Jon Leibowitz, the commission's chairman, said at a news conference while referring to Google's search algorithm.

The company was not fined for its conduct that the chairman labeled "clearly problematic and potentially harmful to competition." Google has maintained all along that its search results were protected by the First Amendment, a claim the FTC did not publicly address Thursday.

Also, under the accord, Google agreed to resolve disputes with competitors over patents it inherited from its $12.5 billion Motorola purchase – "interoperability standards" patents that the commission concluded Google was using to strong-arm competitors financially and to hinder innovation in the smartphone and tablet space. Under federal patent law, patents deemed essential, like the ones Google purchased, must be licensed on "fair and reasonable terms."

"We've agreed with the FTC that we will seek to resolve standard-essential patent disputes through a neutral third party before seeking injunctions. This agreement establishes clear rules of the road for standards-essential patents going forward," Google said in a statement.

"Today's action makes clear that commitments to make patents available on reasonable terms matter, and that companies cannot make those commitments when itsuits them – that is, to have their patents included in a standard and then behave opportunistically later, once the standard is in place and those relying on it are vulnerable to extortion," Leibowitz said.

Still, even if websites have problems with how they turn up in Google's search rankings, web users themselves don't seem to find Google's results wanting. In the U.S., a full two-thirds of all web searches were made using Google, with Microsoft’s Bing a very distant second and Yahoo coming in third, according to a recent comScore report.

Consumer groups, meanwhile, ripped the FTC.

"The FTC had a long list of grievances against Google to choose from when deciding if they unfairly used their dominance to crush their competitors yet they failed to use their authority for the betterment of the marketplace and to the advantage of consumers by declining to take action against the dominant company," said Steve Pociask, president of the American Consumer Institute Center for Citizen Research.

Consumer Watchdog agreed that the FTC accord will "ensure competition in the manufacture of smartphones and tablets." But, overall, the group said "the FTC rolled over for Google."

Regarding Google search, the chairman pointed out that Google "allegedly" scraped user-generated restaurant reviews from Yelp "and led consumers to believe that these reviews were its own." When websites complained of the practice, he said, "Google allegedly threatened to remove them entirely from Google's search results."

The chairman called such practices as "potentially harmful" – practices Google is agreeing to discontinue.

"Going forward, Google will allow websites the ability to opt out of appearing in its vertical properties like Google Local or Product Shopping, without being penalized or demoted in its general search results on Google.com," the chairman said.

Leibowitz added that "some evidence" suggested that Google's search algorithm "was trying to eliminate competition." But, in the end, the FTC agreed with Google and found that "Google's primary reason for changing the look and feel of its search results to highlight its own products was to improve the user experience."